Arab Banking Corporation (B.S.C.), the parent company of the Arab banking group headquartered in Bahrain, today announced that the Group’s net profit for 2005 totalled US$129 million. This represents an 18% increase in the net profit from continuing operations of US$109 million for 2004, excluding the profit of US$470 million realised from the disposal of ABC’s subsidiaries Banco Atlántico, S.A., Spain and International Bank of Asia Limited, Hong Kong.
Total income amounted to US$352 million (2004: US$305 million). Net interest income rose substantially to US$193 million (2004: US$152 million) due to growth in business activities (loans and securities) and rise in interest rates. Non-interest income improved to US$159 million (2004: US$153 million). Loan loss recoveries net of impairment provisions amounted to US$14 million (2004: US$10 million), reflecting the continuing improvement in credit quality.
The cost/income ratio improved to 60% (2004: 65%) despite operating expenses having increased to US$211 million (2004: US$199 million). The increased staff costs are attributable mainly to rationalisations carried out for achieving operational efficiencies, hiring of a number of product and specialist staff, and the additional cost of the incentive plans. Premises, equipment and other operating expenses were kept well under control.
ABC Group’s total assets at year end amounted to US$17.6 billion (2004: US$14.9 billion). Investment in securities increased from US$3.6 billion to US$6.0 billion mainly in highly liquid AAA-rated securities. Loans and advances increased to US$6.8 billion from US$6.0 billion. Liquidity remained extremely strong, with the liquid assets to deposits ratio at 75% (2004: 79%). Loans to deposits ratio also remained at a low level of 51% (2004: 56%). The Group continues to maintain a strong capital base, as evidenced by the risk asset ratio of 21.0% (2004: 25.3%), calculated in accordance with the requirements of the Bahrain Monetary Agency.
Over 2005 the Group continued to develop its network – in January ABC International Bank plc opened a representative office in Istanbul, Turkey; to complement its existing representative offices in Stockholm and Madrid, and in September ABCs Iraq branch commenced operations, offering trade finance (documentary credit and collection), bonding, and selective commercial banking services.
During November 2005, ABC successfully launched a US$2.5 billion EMTDN Programme with a debut issue of US$400 million with five year tenor reflecting
the favourable perception ABC enjoys in the international financial markets. Earlier in the year, the major rating agencies upgraded ABC’s ratings: Standard & Poors and Fitch assigned a rating of BBB (from BBB- one year before) and Moody’s gave a rating of Baa2/Prime-2 (from Baa3/Prime-3 the previous year).
Looking ahead, ABC looks to the key product groups as the main source of steady and consistent earnings growth for its shareholders. The Treasury group continues to develop new products for its customer base while intensifying its marketing efforts in the region and in the OECD. The Trade Finance Group and its Forfaiting unit are fast expanding their reach and activities out of Bahrain and the ABCIB branches and marketing offices in Europe, enhancing revenue sources. The Project & Structured Finance group seeks not only to maintain its leadership position in the region but to harness the synergistic benefits of its presence out of Bahrain, London, and Paris to expand its services in both the MENA region and Europe. The Retail Banking & SME (small and medium-sized enterprises) group will expand cautiously, both on the back of the existing Arab world retail units and out of greenfield entities or acquisitions. Islamic banking activities are expected to grow substantially in both the MENA region and Europe, with an expanding customer base and increasing product range. Syndications will continue growing its own customer base as well as providing professional support to the other product groups.
In line with the group’s strategy, ABC has commenced building out an investment banking platform focused on MENA. This new investment banking division will provide an advisory and capital raising capability which will enable ABC’s clients to access the broader capital markets, both in the region as well as internationally. ABC intends to play a key role in the development of investment banking in the region and expand its position as an advisor to governments, institutions and corporates in the MENA region. The investment banking division will also act as an intermediary for investors in the region and through its funds management arm, intends to offer a broad range of investment products.
Mr. Ghazi M. Abdul-Jawad, President & Chief Executive said, “ABC’s improved operating result clearly demonstrates the soundness and resilience of the policies that the bank’s Board and management have consistently followed.
“Our enhanced resources, clear market-oriented focus, diversified product range, and pan-Arab presence with an international reach have significantly improved ABC’s earnings potential and positioned the Group for further growth in the future.”